BREAKING: Government To Roll Back Budget Changes Like 1987!

But straight ahead the housing pain is real.A real estate power player is helping us break down the latest numbers as rents continue to rise.So are the budget changes really to blame or are there other factors at play?Well in May's federal budget the government forecast their new measures would increase rents by two dollars a week.Just a couple of months later, the latest PropTrack data shows they've already increased by around $20 a week.

Nationally, after three interest rate rises and continued inflationary pressures, rents have risen around 6 % year on year, raising questions about whether it was the right time for the government's housing reforms.So what does it all mean for the foreseeable future?Well, for more, We're joined now by personal finance expert and buyers agent Ravi Sharma.Good morning to you.Welcome back.What is driving this rent rise here, Ravi?

Well, it's really interesting, right?If you go and have tax reforms that target investors, suddenly investors are saying, well, it's no longer my problem.I don't want to hold an investment property.And that means one less rental property.So supply and demand.If there's less rental properties and more people need to rent, you're going to have rents go higher.

So you're putting it squarely on the government's policy here?Yeah, well, I mean, you already had some movements in some markets like Melbourne and Sydney starting to slow down.But investors are pretty much going, my hands are up.Like if you're not going to allow me to negatively gear properties when I have to go and purchase and you're making it harder to hold on to these properties, unfortunately, I'm not going to let go.

Okay.Is there a difference between city and regional numbers?What are we saying there, Rath?

Yeah, definitely.In saying that, you've still got the difference between units and houses as well.So if you're looking at capital cities, they're slightly moving ahead faster than the regional areas.But you've also got to think that if affordability is the concern and you see a large rush out of people from the capital cities into these regional areas, they're going to be smacked hardest.

Now, the government says the grand finaleof those previous rules means there should be no change for those who already had negative gearing arrangements here.But what are you seeing with new investors here, Ravi?

So existing investors are sort of going, cool, I've got the negative gearing benefits, which means even if I was thinking of selling to go and downsize or get a bigger property, I'm not going to do that anymore because now I'm not going to get those benefits.So suddenly you take out a large portion of supply that will never hit the market.So while this aimed at going first home buyers can get in, suddenly investors are like, well I'm not going to sell if they don't need to.They want to hold on for longer?Correct.

Right, and therefore there's less supply, right?

That's right.

The government says the reforms will help first home buyers.Are we seeing any signs of that happening?I think the prices are coming down a little bit.

Yeah, look, to be honest, and I'm going to tell you quite frankly, no, because first time buyers are first renters.So if they're going to go ahead and rent and they're seeing their rents increase at a faster rate than they can actually save, they'll never actually go and own their own property.So what you're seeing is, yes, it's helping first time buyers by bringing prices down.But to get into that property, you still got to save your way there.And unfortunately, if rents go higher, it's going to get further and further beyond.

Right.So what's driving that little bit of a price drop at the moment, do you think?

Oh, it's definitely sentiment.A lot of people are going, look, I don't know what all of this budget stuff means.I don't know if they're going to change the rules.What's the government doing?They're going to change the rules whenever they like.You know, we saw the self -managed super fund changes come through.

And based on that, a lot of people say, sort of saying, I want to pause.And that's just obviously breaking down the market a little bit.

I imagine that you've crunched the numbers because you're sort of a student, a student of history when it comes to these things as well.So we had those negative gearing changes back in the 80s.We're now having some of those similar arguments rise again, but where do you think this is going to drive rents now in the future?

Well in 1985 we had negative gearing come into the system.Two years later, scrapped.Why?Because in Sydney and Perth we saw rents go up by 15 and 20 percent.We are in a bigger shortage now.We have vacancy rates at record lows and then you introduce reform like this, it means rents will rise and most likely by more than 20 to 30 percent.

And that's pretty crazy when you think about the next 18 to 24 months.

So what does that do to the workforce then?Because it's going to drive teachers, nurses, those essential services out of the main capital cities as well, wouldn't it?

Yeah, that's exactly what we're seeing already.So we were seeing this over the last couple of years, but I think it's going to start accelerating, which is why I say the regional areas are now going to start getting hit so much more because some of these areas don't even have the infrastructure.structure for an extra 20, 30 ,000 people moving there.

Okay, get your real estate crystal ball out Ravi, what are we looking at in the next 12 to 18 months?

I think in the next 12 to 18 months rents will be 20 % higher in most areas and I think it's going to put a lot of pressure on the government and there's going to be things like rental freezes which isn't a good idea believe it or not and we can play that out in history and also see other countries adopt it and it just hasn't worked out for the renters as well as the landlords.

Is there talk of that?

I think they're starting to, there's murmurs around it and I don't think it's a good idea.

Has it worked in some other European countries though?

Yeah they brought it in and it didn't really work and the big thing with that is if you're owning a property and now you've got bigger costs in terms of holding costs but now the government's telling you you can't increase rents what's going to happen?You either sell it or you're going to say well I'm just not going to go and renovate the property which means a lower standard of living which is not the ideal situation.

Tough time for renters ahead.Thanks Ravi.Ravi thank you.